Q. I am federal employee and plan to retire in about six months or a year. I want to leave the money in TSP when I retire, but want to include TSP in a living revocable trust. I read online that it is not a good idea because the IRS considers that as a lump-sum transfer and I will be taxed at almost 35 percent. But when I consulted an estate-planning attorney, I was told that I can include TSP in the trust, and it does not make any difference in how I withdraw the money. I am confused. Please advise me if it is a good idea to include TSP in a revocable trust or not.
A. Revocable trusts are generally disregarded by the IRS for tax purposes and the assets inside them treated as your own. But that is a generalization and not advice. Why would you question your attorney’s advice based on something you read online? Who wrote it? I’ll bet that your estate-planning attorney is right and what you read online is wrong or doesn’t apply to your situation.
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